Personal loans are often seen as a convenient financial solution for individuals needing immediate funds. These loans are popular for their flexibility, allowing borrowers to use the money for various purposes, from medical emergencies to purchasing gadgets.

However, there is a widespread belief that personal loans are only available to salaried or self-employed individuals. This raises an important question: Can students in India qualify for personal loans?

Financial independence is a stepping stone for students to build a successful future. Whether it’s covering unexpected expenses, paying for education-related needs, or managing living costs, a personal loan could be a vital resource. However, understanding the eligibility and approval process is key. Let’s explore this topic in detail.

Understanding Personal Loans for Students

A personal loan is an unsecured loan provided by banks or NBFCs that doesn’t require collateral. Borrowers can use these funds for a wide range of purposes, including:

Education expenses, such as course fees or study materials.
Living costs, including rent and utilities.
Purchasing gadgets like laptops for academic needs.
Emergencies, such as medical or travel-related expenses.

The primary advantage of a personal loan is its flexibility in usage, which is not restricted to specific purposes like education loans.

Are Students Eligible for Personal Loans?

While students face challenges in qualifying for personal loans due to their lack of stable income, some special cases may allow them to access these loans:

Guarantor-backed loans where parents or guardians co-sign.
Part-time earners or freelancers who can show proof of regular income.
Loans tied to future potential based on career prospects or internship earnings.

Key Factors That Determine Loan Approval for Students

1. Guarantor Requirement

Most financial institutions require a guarantor when a student applies for a personal loan.

A guarantor is usually a parent or guardian who assumes the responsibility for loan repayment if the student defaults.
The CIBIL score and income stability of the guarantor play a critical role in loan approval. Lenders assess the guarantor’s financial history and repayment capacity before approving the loan.

2. Part-Time Income or Freelance Earnings

Students with a part-time job or freelance income are more likely to qualify for a personal loan.

Lenders may consider internship stipends, freelancing projects, or part-time salaries as proof of income.
Documentation required includes bank statements, salary slips, or contract agreements.
Regular income indicates repayment capacity, increasing the likelihood of approval.

3. CIBIL Score

A CIBIL score is a numerical representation of an individual’s creditworthiness. While students may not have an established credit history, lenders evaluate alternatives:

A guarantor with a strong CIBIL score can boost approval chances.
Students can start building their credit history early by using a student credit card or paying off small loans responsibly.

4. Loan Purpose

Lenders are more likely to approve loans for purpose-specific needs, such as:

Education-related expenses, including tuition or certifications.
Buying gadgets, such as laptops for academic purposes.
Emergency needs, like medical or travel costs.
Clearly stating the loan purpose during application improves transparency and approval chances.

5. Repayment Capacity

Even if a student does not have a stable income, lenders assess:

The co-borrowers repayment capacity, such as a parent or guardian.
Future earning potential, especially for students nearing graduation or those with job offers.
Loan amounts and terms are adjusted to ensure they are manageable for the borrower and guarantor.

Types of Personal Loans Available to Students in India

1. Student-Specific Personal Loans

Features and Benefits

Tailored for students: These loans are designed specifically to cater to students’ financial needs.
Flexible repayment options: Many banks offer lenient repayment terms, including deferred payments until after graduation.
Lower documentation requirements: Simplified processes to make loan approval easier for students.

Examples of Banks/NBFCs Offering These Loans

SBI Scholar Loan: Offers loans for students in premier institutions.
HDFC Personal Loan for Students: Provides flexible loan terms with parental guarantor support.
NBFCs like Bajaj Finserv: Offer personal loans to students with collateral or guarantor support.

2. Loans Against Fixed Deposits or Securities

How Students with Savings or Assets Can Use Them

Collateral-based lending: Students or their parents can pledge fixed deposits (FDs), mutual funds, or shares as security for the loan.
Lower interest rates: Since these are secured loans, they come with reduced interest rates compared to standard personal loans.
Continued earnings on FDs: The pledged FD continues to earn interest during the loan tenure.

Tip: If you or your family have fixed deposits, this is an excellent option to secure funds without breaking the deposit.

3. Education Loans vs. Personal Loans

Differences and Overlaps

Education Loans: Specifically for academic purposes, such as tuition fees, books, and study materials. Usually comes with lower interest rates and a repayment moratorium.
Personal Loans: Can be used for any purpose, including education, living expenses, or emergencies. However, they typically have higher interest rates and shorter tenures.

When to Opt for a Personal Loan Over an Education Loan

Urgent non-academic needs: For living costs, rent, or gadgets not covered by an education loan.
Smaller loan amounts: When you need quick access to limited funds.
Lack of eligibility for education loans: If you do not meet the requirements for an education loan, personal loans might be your alternative.

4. Instant Loans on Apps

Risks and Rewards of Using Loan Apps

Rewards:
- Quick disbursal within hours.
- Minimal documentation requirements.
Risks:
- Higher interest rates and hidden charges.
- Risk of data misuse if the app is untrustworthy.

Tips to Choose a Trustworthy Platform

Check for RBI registration and certification.
Read customer reviews and ratings on app stores.
Avoid apps with unclear terms or excessive permissions.

Documents Required for Students Applying for a Personal Loan

When applying for a personal loan as a student, having the right documents ready can streamline the process. Here’s what you’ll typically need:

1. Identity Proof

Aadhaar Card
Passport
Voter ID

2. Address Proof

Utility bill
Aadhaar card
Rental agreement

3. Guarantor Documents

Income proof: Salary slips or ITR of the guarantor.
CIBIL report: A strong CIBIL score of the guarantor improves approval chances.

4. Proof of Enrollment in an Educational Institution

Admission letter
Current semester fee receipt

5. Income Proof (if applicable)

Stipend certificates for internships.
Salary slips for part-time jobs.
Bank statements reflecting consistent freelance income.

Advantages and Disadvantages of Personal Loans for Students

Taking a personal loan as a student has its pros and cons. Understanding these will help you make an informed decision.

Advantages

Quick Access to Funds:
- Personal loans are disbursed faster compared to education loans.
- Ideal for emergencies like medical needs or travel.
No Restriction on Usage:
- Funds can be used for rent, gadgets, or even leisure activities.
- Flexible compared to education loans, which are restricted to academic purposes.
Helps Build Financial Responsibility:
- Taking and repaying a loan on time improves your credit history.
- Early financial management skills benefit long-term financial health.

Disadvantages

High-Interest Rates Compared to Education Loans:
- Personal loans for students often have higher interest rates due to the lack of stable income or credit history.
Risk of Defaulting Due to Lack of Income:
- Without a stable source of income, repaying the loan might become difficult.
- This can affect your guarantor’s credit score as well.
Possible Impact on the Guarantor’s Credit Score:
- Any missed payment or default reflects on the guarantor’s credit report, potentially affecting their future borrowing ability.

How to Improve Eligibility as a Student

Securing a personal loan as a student can be challenging due to the lack of stable income and credit history. However, you can take proactive steps to improve your eligibility and increase the chances of loan approval. Let’s explore the strategies that can help.

1. Start Freelancing or Part-Time Work to Showcase Income

Benefits:
- Demonstrates your ability to earn and repay the loan.
- Builds a financial track record that can be showcased to lenders.
Examples:
- Freelancing as a content writer, designer, or developer.
- Part-time jobs such as teaching, retail, or internships.
Documentation:
- Salary slips, payment receipts, or bank statements reflecting consistent income.

2. Maintain a Good Relationship with Banks

Savings Accounts:
- Regularly use your bank account to show activity and credibility.
Fixed Deposits (FDs):
- Open an FD to build trust with your bank.
- You can also use FDs as collateral for loans.
Pro Tip:
- Stick with a bank you’ve been associated with for a long time, as loyalty can work in your favour.

3. Apply with a Guarantor with a Strong Credit Score

Role of a Guarantor:
- A guarantor’s creditworthiness can significantly boost your loan application.
Ideal Guarantor Profile:
- Stable income.
- Strong CIBIL score (750+).
- Low existing debt.
Impact:
- Increases lender confidence, reducing the likelihood of rejection.

4. Research and Compare Loan Offers from Different Banks and NBFCs

Why It Matters:
- Different lenders have varying eligibility criteria and interest rates.
Tips for Comparison:
- Look for special schemes for students.
- Compare processing fees, tenure, and repayment flexibility.
Online Tools:
- Use loan comparison platforms to find the best deal.

Alternatives to Personal Loans for Students

While personal loans can be a viable solution for students, other options might better suit your financial needs. Let’s look at some alternatives.

1. Education Loans

When and Why to Consider Them

Best for Academic Needs:
- Covers tuition fees, study materials, and living expenses.
When to Choose:
- For higher education in India or abroad.
- If you qualify for government schemes like the Vidya Lakshmi Portal.

Benefits:

Lower Interest Rates:
- Education loans typically have lower rates than personal loans.
Repayment Moratorium:
- Many lenders offer repayment holidays until course completion.

2. Student Credit Cards

Features and Limitations

Features:
- Low credit limits to encourage responsible spending.
- Builds your credit score early.
Limitations:
- Higher interest rates if dues are not cleared.
- Not suitable for large financial needs.

3. Scholarships and Grants

Leveraging Financial Aid Options

Benefits:
- Non-repayable financial assistance.
- Can significantly reduce the need for loans.
How to Find Them:
- Apply through institutional or government programs.
- Research private organizations offering merit-based scholarships.

4. Borrowing from Family and Friends

Pros and Cons of Informal Borrowing

Pros:
- No interest or minimal repayment pressure.
- Flexible repayment terms.
Cons:
- May strain relationships if not repaid on time.
- Lack of formal agreements can lead to misunderstandings.

Things to Consider Before Taking a Personal Loan as a Student

Taking a personal loan is a significant financial decision, especially for students. It’s crucial to assess all aspects carefully before proceeding.

1. Evaluate the Necessity of the Loan

Ask Yourself:
- Is the loan necessary, or can the expense be postponed?
- Are there alternatives like scholarships or grants?
Avoid Over-Borrowing:
- Borrow only what you need to prevent repayment stress.

2. Compare Interest Rates and Loan Terms

Interest Rates:
- Check and compare rates from multiple lenders.
- Look for lenders offering special student loans with lower rates.
Loan Terms:
- Understand the tenure, EMI structure, and prepayment penalties.

3. Ensure Repayment Feasibility

Plan Ahead:
- Calculate EMIs and ensure they fit your future or current income.
- Use online EMI calculators for precise planning.
Co-Borrower Impact:
- Ensure your guarantor or co-borrower is aware of the repayment terms.

4. Understand the Consequences of Default

Credit Score Impact:
- Defaults can harm your credit score and that of your guarantor.
Legal Actions:
- Some lenders may initiate legal proceedings for non-repayment.
Future Borrowing:
- Defaulting now can make it harder to secure loans in the future.

List of Banks and NBFCs Offering Personal Loans to Students

Finding the right lender for a personal loan as a student is crucial to ensure favourable terms and manageable repayment. Several banks and NBFCs in India offer personal loans tailored for students, either directly or indirectly, with features that make them accessible.

1. State Bank of India (SBI)

Product Name: Scholar Loan and personal loans for dependents.
Interest Rates: Competitive rates for educational and personal purposes.
Repayment Options: Flexible terms with moratorium periods for education-related expenses.

2. HDFC Bank

Features: Personal loans for dependents with salaried co-borrowers.
Eligibility: Guarantor required; co-applicant with stable income preferred.
Interest Rates: Starts from 10.50% per annum.

3. ICICI Bank

Product Name: Personal loans for education and lifestyle expenses.
Special Features: Discounts for existing customers with active savings accounts or fixed deposits.

4. Bajaj Finserv

Features: Instant loans for young borrowers.
Key Benefits: Fast disbursal via apps and minimal documentation.
Risks: Higher interest rates for short-term borrowing.

5. Axis Bank

Special Programs: Personal loans for dependents with salaried guarantors.
Repayment: Up to 60 months for repayment flexibility.

Key Features, Interest Rates, and Repayment Options

Key Features to Look For:

Low Interest Rates: Prioritize lenders offering student-centric schemes.
Flexible Tenures: Longer repayment periods reduce EMI pressure.
Prepayment Benefits: Check if the lender allows prepayment without penalties.
Quick Processing: Lenders with digital platforms ensure fast approval.

Sample Interest Rates (Subject to Change):

Lender	Interest Rate Range	Repayment Tenure
SBI	9.65% – 11.50%	3 to 7 years
HDFC Bank	10.50% – 15.50%	1 to 5 years
Bajaj Finserv	12.99% – 18%	12 to 60 months

Tips for Approaching the Right Lender

Research Thoroughly: Compare online platforms to shortlist lenders offering student-centric features.
Prepare Documents: Keep guarantor details, proof of income, and other documents ready for faster approval.
Check Reviews: Read customer reviews to assess reliability and customer service.
Use Loan Calculators: Calculate EMIs to understand affordability before applying.

Conclusion

Personal loans are an option for students in India, provided they meet certain criteria or have a strong guarantor. Banks and NBFCs offer specific schemes tailored to young borrowers, but it’s important to explore alternatives like scholarships or education loans.

With the right approach and proper planning, students can secure personal loans for their financial needs. Responsible borrowing ensures that repayment doesn’t become a burden.

“Need help finding the best personal loan options as a student? Contact Kreditbazar today for expert assistance!”

FAQs About Personal Loans for Students

Q1. Can students apply for personal loans in India?
Ans1. Yes, students can apply for personal loans in India. However, most lenders require a guarantor or proof of income, as students typically lack a stable income source.

Q2. What are personal loans for students used for?
Ans2. Personal loans for students can be used for various purposes, such as paying for education expenses, hostel rent, purchasing gadgets, or managing emergencies.

Q3. How do personal loans differ from education loans?
Ans3. Education loans are specifically designed for academic expenses, while personal loans are more flexible and can be used for non-educational purposes as well.

Q4. Do students need a CIBIL score to get a personal loan?
Ans4. While having a good CIBIL score helps, it’s not always mandatory for students. A guarantor with a strong credit score can help secure the loan.

Q5. Can students get loans without a guarantor?
Ans5. It’s rare for students to get loans without a guarantor. However, if they have collateral, such as a fixed deposit, they might be eligible.

Q6. What are the eligibility criteria for students applying for personal loans?
Ans6. Students must either have a guarantor, a part-time income source, or collateral. Some lenders also require proof of enrollment in an educational institution.

Q7. What documents are needed for student personal loans?
Ans7. Required documents include identity proof (Aadhaar, passport), address proof, guarantor details (income proof and CIBIL score), and proof of enrollment.

Q8. Can part-time jobs help in getting a personal loan?
Ans8. Yes, income from part-time jobs or freelancing improves a student’s eligibility by demonstrating financial stability.

Q9. Is there an age limit for students to apply for personal loans?
Ans9. The typical age range is 18 to 35 years, but it may vary based on the lender’s policies.

Q10. Can international students apply for loans in India?
Ans10. Most lenders cater only to Indian citizens or residents, making it difficult for international students to get personal loans.

Q11. What is the typical interest rate for personal loans for students?
Ans11. Interest rates range between 10% to 18%, depending on the lender and the student’s profile.

Q12. How long is the repayment tenure for personal loans?
Ans12. Repayment tenures usually range from 12 to 60 months, depending on the lender’s terms.

Q13. Can students repay the loan early?
Ans13. Yes, many lenders allow prepayment, but some may charge a prepayment penalty.

Q14. Are processing fees applicable on student personal loans?
Ans14. Yes, lenders typically charge a processing fee ranging from 1% to 3% of the loan amount.

Q15. What happens if a student defaults on a personal loan?
Ans15. Defaulting negatively affects the guarantor’s credit score and could result in legal action from the lender.

Q16. Are there personal loans specifically for students?
Ans16. Yes, some banks like SBI and NBFCs offer personal loans tailored for students with flexible terms and lower interest rates.

Q17. Do banks offer discounts on loans for students?
Ans17. Certain banks provide benefits like lower processing fees or preferential interest rates for education-related personal loans.

Q18. Are there NBFCs that provide student loans?
Ans18. Yes, NBFCs like Bajaj Finserv and Tata Capital offer personal loans to students, but usually with higher interest rates.

Q19. Can students get instant loans through apps?
Ans19. Yes, students can use loan apps for instant loans, but they must verify the app’s authenticity to avoid fraud.

Q20. Are there loans available without income proof?
Ans20. Students can avail of loans without income proof by applying with a guarantor or using collateral like fixed deposits.

Q21. How can students improve their eligibility for personal loans?
Ans21. Students can improve eligibility by taking up part-time jobs, maintaining a savings account, and applying with a guarantor with a strong credit score.

Q22. Does freelance work help in loan approval?
Ans22. Yes, freelancing income demonstrates financial stability and increases the chances of loan approval.

Q23. How does a guarantor affect the loan application?
Ans23. A guarantor with a good credit score and stable income enhances the chances of approval and might also result in better loan terms.

Q24. Can students use fixed deposits as collateral?
Ans24. Yes, loans against fixed deposits are a good option for students, as they are secured and may offer lower interest rates.

Q25. What role does the CIBIL score play in student loans?
Ans25. A good CIBIL score increases approval chances. If the student doesn’t have a credit history, the guarantor’s score is considered.

Q26. Are education loans better than personal loans?
Ans26. Education loans are preferable for academic purposes due to their lower interest rates and repayment moratoriums.

Q27. Can students use credit cards as an alternative?
Ans27. Yes, student credit cards can cover small expenses, but they come with higher interest rates if not repaid promptly.

Q28. What scholarships or grants are available for students?
Ans28. Scholarships and grants, offered by institutions or governments, provide non-repayable financial aid to deserving students.

Q29. Is borrowing from family a good option?
Ans29. Borrowing from family can be a quick solution without interest, but it may strain personal relationships if repayment terms are unclear.

Q30. How do government schemes support students financially?
Ans30. Government schemes like subsidies on education loans or skill-development programs help students manage their finances better.

Can I Get a Personal Loan if I’m a Student?

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